The ‘Streets Ahead’ PFI contract

Streets Ahead – what you need to know

The Streets Ahead highways renewal contract exists between Sheffield City Council (SCC) and Amey Plc. The contract was originally negotiated by a Liberal Democrat led council but was finalised under Labour and signed in 2012.

The Contract:

• runs for 25 years, ending in 2037.

• will cost taxpayers £2.2 billion over the contract’s lifetime

• was negotiated behind closed doors – there was no discussion of the contract in the Council Chamber and it did not go before the Scrutiny Board

• despite repeated requests to see the contract, the only version that the Council have released for public examination is unusually heavily redacted

• considering how ready the Council have been to defend the contract, it came as a shock when The Guardian revealed that the Council Leader, Julie Dore, and other senior Councillors had not seen even seen an unredacted contract.

What is PFI?

Historically Local Authorities (LAs) used in-house teams to deliver public services: from collecting bins to renewing highways. It was argued that these in-house departments were spending tax payers money inefficiently and so a new method for overseeing public services and infrastructure projects was proposed by the then Government led by Margaret Thatcher. The Private Finance Initiative (PFI) outsources these jobs to private companies. Tax payers money is used to underwrite project-financing which is arranged by the private sector. They in turn borrow money from banks and other lenders.

In addition to building infrastructure and providing funds, many private companies also operate public services – frequently employing former public sector staff whose jobs have been transferred to the private sector.In practice this means that certain Council staff could have faced a conflict of interests when drawing up the contract with Amey, as Amey were to become their future employers!

The problems with PFIs

When Council contracts go to private companies it creates layers of secrecy between the contractor and the person paying their wages, namely the tax payer. Private companies are not subject to the same transparency rules as those governing public sector organisations. This means that members of the public are often frustrated in their requests to see information, as companies can refuse to provide any data deemed to be ‘commercially sensitive’.

When public services are overseen by LAs, voters can hold Councillors to account in local elections. There is no equivalent power to ensure that private companies delivering the same services are fully accountable for their actions. This is worrying because it relies on the integrity of the private sector to provide a good quality, value for money services on behalf of tax payers. The expected high standard is in direct conflict with a private company’s main objective, namely making maximum profits.

Evidence of poor value for money

The Government’s own Treasury Select Committee has concluded that PFIs are unsuitable for delivering public services and infrastructure investment because they offer such poor value for money to the tax payer. Amey have a previous history of controversy in delivering contracts with other LAs. Here are two high-profile examples:

Herefordshire Council’s contract with Amey for highways works and maintenance of public spaces ended in 2013. In 2015 the Council were still trying to recover a payment awarded to them, by the High Court, for substandard works and non-delivery of services by Amey.

A dispute between Amey and Birmingham City Council over the standard of works undertaken during the £2.7 billion contract to maintain roads and street lighting ended up in the High Courts in 2016. Amey have been obliged to put aside £55 million should the court case go against them.

Local Authorities turn their backs on PFI contracts

In 2011, Cumbria County Council’s (CCC) contract with Capita expired, presenting an opportunity to bring outsourced services back in-house. After 10 years of footing the inflated bill for add-on services, e.g. any works not included under the original contract, the Council has now been able to balance its budget and improve its ability to respond to unforeseen crises. This was a timely decision as it meant that CCC were able to tailor their response to the damage wrought by Storm Desmond in 2015, without having to negotiate expensive and time consuming alterations to ‘out-of-contract-work’ with a private contractor.

CCC are not alone in questioning the flexibility and value of PFI. In a bid to save £100,000 a year, in early 2017 Peterborough City Council proposed finding a mutually agreeable way of ending their waste collection and recycling contract with Amey just six years into the 23 year term.

In 2013, Liverpool City Council awarded Amey a nine-year contract to clean the city’s streets. After only three years the Council cancelled the contract due to Amey’s consistently disappointing standard of work and failure to address their shortcomings.